The New Zealand Dollar remains one of the best performers against the US dollar, as the NZD/USD pair continues to climb higher. The pair is currently under a correction, and I think it might continue to trade higher in the short term. There is a triangle forming on the 4 hour chart for the pair. If the pair breaks the triangle resistance zone and settles above it, then we can jump into a buy trade.
Alternatively, if it breaks it down, then there are several supports on the way down for the pair. If the pair falls from the current levels, makes a stop and creates a bullish divergence, then we can enter into a buy trade. Remember, wait for the pair to settle around the support zone before jumping into a trade.
Initial target should be around the 0.8740 level, and final target could be around the 0.8780 level. Stop should be placed below the broken triangle in the first scenario, and below the 0.8550 level in the second scenario.
Reviewing yesterday’s events and trades
Yesterday, during the London session, the Euro zone CPI data was released. The outcome was broadly in line with the expectation, as the Euro zone inflation fell to 0.5%. The Euro was seen trading a touch higher after the release, but the momentum was still lagging. Moreover, the economic data released during the NY session was above or around the expectation, which resulted in a mover higher in the US dollar.
Fundamental Outlook for the day
Today is an important day as the US inflation data will be published during the New York session. The market is expecting the US inflation to remain around the 2% level. If the outcome beats the expectation, then the US dollar might gain in the coming session. Alternatively, a miss could result in a dollar selling. Moreover, the US building permits and housing starts data will also be released around the same time, which could add to the volatility during the NY session.